02 Dec 09 Decision Impact Statement - South Steyne Hotel
The ATO has issued a Decision Impact Statement in relation to the Full Federal Court decision in South Steyne Hotel Pty Ltd & Ors v FCT  FCAFC 155; 2009 ATC 20-145. The case concerned various GST issues arising out of a strata titled hotel development, in particular whether the margin scheme applied to the sale of apartments to investors and whether the purchaser of a reversionary interest makes a supply by way of lease to the tenant: see 2009 TAXVINE No 47 (27 November 2009).
The Commissioner unsuccessfully argued that, having regards to the terms of the contract for sale, the margin scheme did not apply to the sale of apartments to investors. The Decision Impact Statement states that the Commissioner's preliminary view is that he will not seek special leave to appeal to the High Court regarding the Court's conclusion on this issue.
In relation to the issue of whether the purchaser of a reversionary interest makes a supply by way of lease to the tenant, the Commissioner submitted that where a freehold estate is purchased subject to a continuing lease, the new owner makes a supply by way of lease to the tenant. The trial judge held that the supply by the purchaser of apartments as a consequence of it taking title subject to the ongoing lease to the management company was a supply by way of lease that was input taxed, and declined to make the declaration sought by the taxpayer that it was a supply that was not input taxed.
The Full Court rejected the Commissioner's submission, expressing the view that there was no further supply. On this basis, the Full Federal Court did not disturb the trial judge's refusal to make the declaration sought by the taxpayer, albeit that they disagreed with her reasoning.
The Decision Impact Statement explores "anomalies" arising from the Full Federal Court's decision, and sets out in four numbered paragraphs (which it describes as "a public ruling for the purposes of s 105-60 of Schedule 1 to the Taxation Administration Act 1953") the way in which the ATO will apply the GST Act to leases, pending further consideration. In particular, the ATO will continue to administer the GST Act in relation to strata titled hotel developments in accordance with the principles set out in GSTR 2000/20.
For a copy of the Decision Impact Statement, go here